Tag Archives: Eurozone
So many things have happened in Cyprus this week, that it will take many years to get a proper perspective on the entire tragedy, but there are a few things that are already apparent to me
- The savers have been shafted. People who have saved all their lives and built up a nest egg for themselves have seen 60% of their savings (over 100k) robbed out of their accounts.
- Unbelievably the political elite seem to be immune as always and are reported to be well able to look after themselves.
- This money has been lost because the bankers had already spent it. When these people popped that money into the vault for safe keeping, they had no idea that as soon as they left the bank, the manager was heading down to the vault, to take it out and spend it on speculative investments, derivatives, performance bonuses, fast cars, or a yacht for his mistress – but that is exactly what happened, because there was nothing left when they went back for it.
- Whether the money belonged to tax avoiding Russians or not is a moot point, but a handy bit of propaganda to deflect from the fact that Cyprus is only one of many offshore investment set ups in Europe, including Luxembourg, and even the City of London ( not to mention our own IFSC). Only 27% of the accounts were reported to be Russian (though the value may be in excess of that). There can be no doubt that many of the accounts would have been local.
- The EU has broached new ground, by failing to protect the depositors. The Irish economy was devastated by the Troika insistence that all bondholders and depositors should be protected. We were told that we must take on the burden of speculative debt, or the financial system of Europe would implode. In Cyprus depositors were thrown to the wind. The initial proposal to levy all depositors was rejected by the communal horror expressed throughout the EU, and though the comfort of attacking the alleged “Tax Evaders” quelled the disgust, the initial intention remains clear. This is a volte face from the Troika that has ruined Ireland and Cyprus by exactly contrary policies.
- The only thing “special” about Cyprus, is that it is the first. There can be no rowing back from this. When the next country comes looking for support from its European “neighbours”, what happened in Cyprus will be be on the table, officially or not. The northerners will say “we cannot be expected to contribute, unless you do so yourselves like the Cypriots did”. Bank deposits in the peripheral “PIIGS” countries are inherently in the spotlight. The flight of money from the EU is inevitable.
- There is nothing left in the EU solidarity myth, other the the hegemony of the Northern nations. Ordinary Germans or Dutch feel no empathy for the periphery, whom they see as profligate and unable to self-govern (with some justification).
- Cyprus has said it is staying in the Euro, but this is a fallacy. It is already out of the Eurozone. It is like Macedonia, using the Euro as a currency, but not being a part of the Eurozone. Owning a €1000 in Cyprus is not the same as owning it in Germany, France or in Ireland. There are exchange controls. You might not even be able able to access it. It could be confiscated. You cannot use it to buy stuff abroad or invest abroad.
- Cyprus will have enormous difficulty trading anything from ice cream to oil, and attached to the euro, will face huge unemployment and politico-commercial collapse.
- The only people seriously supporting the continued Euro Fiasco are the politicians, bankers and large industrialists. The European economies have been caged in a common currency that has decimated the peripheral countries with the combination of cheap interest, excess money supply and stagflation. Cyprus is the dead canary at the bottom of the cage.